GE Vernova T&D India Limited (522275) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the discussion related party proposal for approval in the forthcoming AGM of GE T&D India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sushil (sic) [ Suneel ] Mishra. Thank you, and over to you, sir.

Yes. Thank you, Miki. Myself, Suneel Mishra. So good day to all of you. Welcome to today's conference call with the GE T&D India Limited management team here. This conference call has been organized to present and discuss in some details the related party proposals for approval in the scheduled AGM on 10th of this month. Now let me first introduce my management team available on this We have with us Mr. Pitamber Shivnani, who is our Managing Director and Chief Executive Officer. We also have with us Mr. Sushil Kumar, who is the CFO and Whole-Time Director. We have Mr. Manoj Prasad Singh, who is the Company Secretary as well as we have Mr. Anshul Madaan, who is our Communications Leader. Please note that this conference call is scheduled up to 6 p.m. I hope you would have received the presentation on the topic and the same we have uploaded it on our website. I would now request Mr. Sushil Kumar, who is our CFO, to take you to presentation on related party proposal in some detail. So over to Mr. Sushil.

Thanks, Suneel. Good evening, everyone. Thanks for joining today. This call is predominantly for the purpose of taking the investor community through the related party proposals that are being given in the notice to the AGM and we'll be open for the [ voting ] now. The similar call was done last year also wherein we explained the nature and purpose of these transactions. There was a short 2, 3 pager presentation, which has been sent to everyone or to [indiscernible]. Hope everyone has got a copy of that. And first, on the Page 2 of the presentation, which summarizes all the items mentioned in the proposal number 8, 9 and 10 of the notice to the AGM. There are 3 proposals. The first proposal is for the intracompany borrowing and deposit, which is a cash pool arrangement with GE Industrial India Private Limited. The borrowing proposal is up to a maximum limit of INR 700 crores, and the deposit proposal is for a limit of INR 150 crores. This cash pool arrangement is existing for the last few years now, and this helps to optimize the overall cash management and borrowing position for the operation and sales in terms of the borrowing cost to the company. There are details in the next page of the benefits and the key terms and condition of these proposals, and we'll discuss on the next page. The actual utilization depends on the need of borrowing. So if you look at the Page 40 of the annual report, that shows how much utilization in the last financial year 2021. So while the approval, let's say, has been taken for INR 700 crores for borrowing, last year, the maximum had an utilization of INR 200 crores. And again -- because as you all know that we have been improving in terms of our cash flow management that has been -- we have generated cash in the half year and the borrowing need have come down. But still to be on a -- let's say, on the approval side, we still propose to keep INR 700 crores because the borrowing cycle keeps moving depending on the status of the project and depending on the original inventory and receivable builder cycle, which fluctuate during the year, while overall endeavor at the end of the year it will generate the positive cash. On the deposit side, we had made only a deposit of INR 15 crores during the year against the limit of INR 150 crores. So that is proposal #1. The proposal #2 is related to the sale and purchase of goods and services and the contract and arrangement related to any company other the project-related services. The first item, which is payments which is the goods and services for the projects it's related to 2 situations. The situation 1 where GE India Industrial gets a larger contract for setting up [indiscernible] or any other business line from the customer, which include the substations co or maybe there is a certain chances of joint bidding along with the GE India Industrial, where the customer wants to award end-to-end contract to the GE company. And the second situation is where the GE T&D gets contract from the end customers, third-party customer, and there are certain equipments or products, which we need to buy from the GE India Industrial Private Limited. These are -- this is the projects, which may come in the future. There's no as such existing arrangement for this year, but as the tender pipeline keeps building, there maybe situations where we have to bid [indiscernible]. And if you see the last year number, while we have made bid for few contracts, we could not get the contracts awarded to GE. So the actual utilization was quite low. We had only INR 7 crores of sale order received from the GE India Industrial. But nonetheless, keeping in mind the projects in the pipeline and the future opportunities, the proposal of INR 250 crores of related party transaction has been continued in the proposal, as also continued from the last year. The second item in this is the goods and services where the IT-related services are shared or travel-related quotas or center of excellence related services are shared. So they are non-project-related activities, we are continuing to seek approval of INR 150 crores aligned with the last year. Again this -- last year, the actual utilization was less than INR 50 crores. The third proposal in the list is the sharing of facilities and office spaces and facility arrangement, wherever there is a redundancy offset at the GE T&D, which can be used to save the cost and operating expenses for the company or if there maybe need of getting the small offices at some other states where GE T&D doesn't have the presence but GEIIPL has been presence, and we can leverage the available facility at a better cost and operating efficiency. So these are the 3 proposals, which have been summarized on Page 1. Page 2, which is specifically talking about the cash pool. The limits for the approval are fixed. The benefits of borrowing are that -- to cash pool that these are available as additional source of funds. These are not secured. The rate of interest is pretty much as per the industry or market practices, duly benchmarked as per the transfer pricing includes. The good features are that there's no minimum tenure of borrowing. These are on-demand utilized depending on the need that we have. There's no fixed tenure, as most of the banking companies are now putting at a minimum tenure of the borrowing. Can be repaid without any penalty earlier also. And it's actually a [indiscernible] balance. And the last thing is that it gives us a better flexibility to play between the cost of funding from banks [indiscernible] funds from bank as well as the GE India Industrial or cash pool, whichever is the best for the operation. Similarly on the lending side, the funds are deposited at the end of the day surplus balance. There's no minimum tenure. It can be called at any time on demand, the bank rate for benchmark to the industry practices and the transfer banking rules and so on. Moving to the last page. Specifically talking about payroll, which is a good consumption. So these projects where we can bid jointly along with GEIIPL, will give us additional opportunities to do the business, if the customers need the GE entities to bid together. The transactions are done at the on-plan basis and the due approval is taken from the Board of Directors after the process also. Similarly on the consumer side, whenever the -- we have the best production services [indiscernible] the GE India Industrial Private Limited, the same is acquired [indiscernible] services. The other services, non-project-related, are mostly where [indiscernible] GE India Industrial Private Limited, which leverage the volume on -- the volume for entire GE entities and hence, we know this is the better rate from the suppliers, which is then charged to the company on the actual basis or in some cases, the transfer pricing offer according to the transfer pricing rules. Most of these center of excellence give us the flexibility of the volume usage. [indiscernible] a service and can be also used as per the new [indiscernible]. And I already talked about that sharing of common facility, which is the last point on the Page 3. So these are the rationale [indiscernible] which we wanted to share with the investor community so that they can evaluate [indiscernible] these are the continuation of the existing proposal from the last year. No change or increase has been proposed compared to the last year. So with that, we'll open up for questions, if any, from the investor community, and we'll be happy to answer.

[Operator Instructions]

So I guess there are no questions. And these are kind of repeat resolutions, but nonetheless we thought that it will be good to share the rationale and share the thought process and give an opportunity to the investor community to ask any questions, if they have and which is [indiscernible] and that's why we have this call today. But if no questions, I guess we can close the call. And thanks to everyone who joined the discussion today.

On behalf of GE T&D India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.